Market Upheaval
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Making sense of the Chaos - USA Hops

Market Upheaval• Basic Supply/Demand• Factors influencing demand.• Factors influencing supply.• What might happen in the next 18months?

Factors Influencing Demand• Hopping rates continue to declineslightly, but demand for alpha has grownabout 2-3% 2annually.• “Just in time.”• Consolidation of brewers has createdlogistical challenges.• Small, but growing demand for hopsoutside of brewing.• Double digit growth in the craft market.

Factors influencing supply• Long term market trough forced acreagereductions and grower consolidation.• New, more efficient alpha hop varieties.• Disappointing harvests:-Europe in 2006.-USA in 2007 (and late planted babies).• Bank pressure to move inventory.• Foreign currency exchange rates.

What to look for the next 18 months……1. How many acres ofalpha hops will beplanted in 2008?5,000 acres x 2400 lbs. per acrex 16.5% Alpha = 750,000 KgA6,000 acres = 900,000 KgA7,000 acres = 1,000,000 KgA

What to look for the next 18 months……2. Will hopping rates continue to decline?• Pre-Isomerizied Products• CO2 extracts 30%• ISO and Reduced ISO products 60% - 70%The ROI on for brewers to convert dosing systems is much moreattractive when hop costs are significantly higher.

What to look for the next 18 months……3. Will US hops continue to be a “bargain” forEuropean customers?

What to look for the next 18 months……4. How many more acres of super alphahops can we harvest efficiently?-Growers, especially in WA are experiencing holes in “harvestwindows”.-Frost in September could result in season ending yield reductions.-Reluctance to invest in new harvest facilities that might not beneeded in near future.-Labor availability will continue to be an issue.

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